Good Company History And Market Opportunity Case Study Example
Calveta Dining Services is a private company that specializes in managing a spectrum of food service operations for approximately 1,000 U.S. senior living facilities (SLFs). By 2009, the company generated $2 billion revenue annually, employing about 15,000 people.
The story of Calveta had begun in 1966, when a passionate Italian immigrant Antonio Calveta opened his first restaurant in New York. The main selling point of the restaurant were the family recipes that Antonio brought from his homeland. The number of restaurants has continued to expand, and eventually Calveta decided to enter the SLF business. Personalized service, high-quality ingredients, and no increase in prices helped Calveta to enter the market successfully and rapidly capture a strong competitive position for further development. By 2009, number of Calveta’s clients totaled 976 SLFs. The services provided by the company do not limit to plain food preparation, but also include menu development, serving, and incorporation of special programs including family events and themed dinners.
In 2007, Frank Calveta, son of Antonio Calveta, took over as the CEO of the company. His father made him promise that Calveta Dining Services would double its sales within five years after Frank becomes CEO. Two years later, Frank Calveta still did not have a clear plan on how to fulfill this promise, as pursuing aggressive growth and maintaining his father’s philosophy, which were also the fundamental principles of the company’s culture, has proven to be a difficult task.
Data from Centers for Medicare and Medicaid Services indicates that in 2008, there were approximately 18,000 nursing homes in the US (Heskett, and Girardi 2). 7% were owned by the government, 27% operated as non-profit organizations, and 66% functioned for profit. 55% of the SLFs were owned by large chains.
External environment of this market has a major influence on successfulness of companies like Calveta. Specifically, economic and political factors that pressure SLFs’ managers to constantly cut costs encourage outsourcing food services. This is due to the fact that third-party service providers often offer higher quality for the same or even lower price.
Primary Competitors and the Competing Strategy
Key competitors of Calveta include Culinair, Robertson, and Pinehurst. However, for all of those companies, the SLF market is just one part of their businesses. All three are significantly larger than Calveta, have international presence, and operate in other major segments like education, hospitals, business & industry sectors, and sports. Unsurprisingly, $2 billion revenues of Calveta are relatively small compared to Culinair’s $22 billion, Robertson’s 20.4 billion, and Pinehurst’s $13.1 billion.
Nevertheless, Calveta manages to maintain a strong competitive position and demonstrate impressive and stable growth, outpacing the industry’s average growth rates. Core competitive advantage of Calveta is the highly personalized service. While large companies cannot afford to dedicate the same level of attention to each individual SLF, Calveta shines in this aspect, offering services that can satisfy customer-specific preferences. Therefore, while also being able to offer competitive prices through negotiation with ingredient suppliers, Calveta has the flexibility and customization levels that its competitors don’t.
Fundamental risks that threaten Calveta are associated with preservation of unique organizational culture while pursuing aggressive growth, and small levels of revenue compared to main competitors.
The first risk relates to the strategy that Antonio Calveta has been pursuing over the course of the last years, and has passed on to his son Frank. Main strength of Calveta lies in personalized service, and overly intense growth hampers it quite considerably. Expansion of the amount of accounts that Calveta cooperates with does not allow it to provide the same amount of attention to each individual account as it used to, at least with the company’s current organizational structure. Moreover, since Calveta competes on quality rather than size or price, saving this strength is especially important.
The second risk refers to Calveta’s relatively small size in comparison with its key rivals. Small successful companies generally tend to be acquired by larger, stronger businesses. While Calveta can hardly be referred to as a small company, its sales are still 5 to 10 times lower than the competitors’. On top of that, a rather large portion of the market that Calveta occupies makes it an even more attractive target for large rivals to acquire.
Business model of Calveta focuses on maximum personalization of services, maintaining competitive prices, and constant growth enabled by internal resources.
High degree of personalization is achieved through Calveta’s organizational structure. Operation of the company are divided into regions, each of which is managed by a regional vice president. The regions are further divided into different areas, each handled by an area manager. Every SLF has an account manager assigned to it. New accounts are located and approached by the sales and marketing team, by management representatives on an area level, and by regional directors on a regional level. Variety and quality of cooking is ensured by chefs, assigned to each individual account, and coordinated by regional chefs.
Finally, Calveta does not support its growth through borrowed resources. Debt levels of this company are very low, as all development is fueled by re-investing the profits.
Business-level strategy of Calveta is based on the five fundamental principles established by Antonio Calveta, called “Antonio’s Way”. Basically, these principles state the following: strive for highest quality and maximally personalized service, maintain cost efficiency for the clients and the company, foster constant innovation in service features, place great focus on employee development, and generate enough resources to fuel constant growth.
Calveta’s business-level strategy seems to be clear and working very well. The company owns a 10% of the market while competing against much larger companies, generates profits even when the economy struggles, and outpaces the industry’s average growth rate, despite having very little level of debt. The only major problem with this Calveta’s strategy is associated with further growth. With the growing number of accounts, it becomes harder to execute the fifth principle while preserving the other four. If Frank Calveta wants his company to continue growing and fulfill the promise made to his father, he must find a way to re-shape the company’s strategy so that further growth would not destroy the long-established “Antonio’s Way”, which remains the main foundation of Calveta’s competitive advantage.
Heskett, James L., and Patricia Girardi. "Calveta Dining Services, Inc.: A Recipe for Growth?" Harvard Business Review 4 Mar. 2011: 1-13. Print.
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